Rama Krishna Sangem
India’s foreign exchange reserves rose by $1.853 billion to $595.051 billion in the week ended on June 30, the Reserve Bank of India said on July 7, Friday. But, the overall reserve had dropped by $2.901 billion to $593.198 billion in the previous reporting week.
Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. Gold reserves dropped by $472 million to $43.832 billion, the RBI said. The Special Drawing Rights (SDRs) were down by $95 million to $18.239 billion, the apex bank said.
What does this mean to India?
This shows India is fighting back a slide in its foreign exchange reserves for over a year. Once touched $600 plus billions, the reserves have gone down by a $ 100 billion early last year. Soaring petrol imports bill last year dealt a blow to us, but thanks to Ukraine war, we started getting cheap oil from Russia. Moreover,a big push to local manufacturing of some MNCs especially Apple’s iPhones have contributed to jump in exports.
Stable rupee and robust foreign exchange reserves are essential to India to keep markets upbeat in this election year. Also this is a time when India is negotiating with some countries to push rupee as exchange currency in international trade deals. For this to happen, we need to keep enough foreign exchange reserves with RBI.
Another worry of finance ministry is the impact of El Ninio on monsoon which accounts for 70 per cent of the country’s agriculture operations. If the rainfall is either deficit or poor, it will impact food grains production and might lead to imports in some cases. If that happens, foreign exchange reserves are bound to deplete in coming months.